Oil futures end higher, break losing streak

SAN FRANCISCO (MarketWatch) -- Crude-oil prices closed higher Thursday to break a three-session losing streak, on the back of strength in gasoline which saw a steep decline in weekly U.S. supplies.

Natural-gas futures also climbed for the first time in four trading sessions after the Energy Department reported a smaller-than-expected climb in last week's supply of the commodity.

October crude oil finished 57 cents higher at $69.83 a barrel on the New York Mercantile Exchange. The contract, which lost 3.6% between Friday and Wednesday, had closed out the previous session at its weakest intraday level since late June.

September reformulated gasoline futures rose 3.42 cents, or 1.8%, to close at $1.9232 a gallon and September heating oil closed at $1.961 a gallon, gaining 1.27 cents.

On Wednesday, the Energy Department reported that crude supplies climbed for the first time in seven weeks, up 1.9 million barrels for the week ended Aug. 17 to 337.1 million. See full story.

That was the first rise reported by the government since early July.

But motor gasoline supplies dropped 5.7 million barrels to 196.2 million, the report said. That was the largest decline the government has reported so far this year, though supplies did fall by a slightly smaller 5.5 million barrels the week of April 6.

Meanwhile, the oil market likely found additional support Thursday from news that some Mexican oil supplies will be delayed due to Hurricane Dean.

State-run Petróleos Mexicanos, or Pemex, is still assessing the damage from the storm, but "it doesn't appear to be significant and output restoration will begin today," said John Kilduff, an analyst at Man Financial, in a note to clients.

In a press release Wednesday, Pemex said the supply of fuel is guaranteed throughout the country.

The general director of the company also pointed out that the return of workers had begun sooner than predicted. Pemex had evacuated more than 18,000 workers as a precaution.

Pemex expects to have 80% of its shut-in production back online by early next week and 100% by the end of next week, assuming no major damage, Scott Hanold, an analyst at RBC Capital Markets, wrote in a research note

"Should the resumption proceed as planned, we estimate that Pemex will have collectively shut-in approximately 15 [million barrels] of oil and 12 [billion cubic feet] of natural gas -- a very small fraction of global supply," he said.

Natural-gas prices gain

Elsewhere in the energy market Thursday, natural-gas futures closed higher for the first time since Friday.

Natural-gas inventories rose by 23 billion cubic feet for the week ended August 17, the Energy Department said Thursday. Analysts at Global Insight expected a climb of 35 billion.

Total stocks now stand at 2.926 trillion cubic feet, up 77 billion cubic feet from the year-ago level and 333 billion cubic feet above the five-year average, the government data said.

Natural gas for September delivery closed up 4.4 cents at $5.622 per million British thermal units. It fell 4% in the previous session to mark the contract's lowest level in two and a half years.

Now that Hurricane Dean has passed, "we are left with warmer-than-average temperatures, accompanied by lower-than-average [supply] injections into storage," said Ben Smith, president of First Enercast Financial, in emailed comments.

"The market will likely realize that the fundamentals they are left with in natural gas are not all that bearish," he said. "Some of the lost ground should be made up as the focus shifts."

Ivan Holman, an assistant economist at Moody's Economy.com, said that the heating season will "likely begin with substantial levels of inventory overhang."

However, "there remain significant downside risks to this bearish outlook ... as the hurricane season has just begun," he said in a report.

Indeed, "we're just now in the peak of the season and it'll probably go through late September to early October," said Beth Sewell, a managing partner at Quantum Gas & Power Services.

In Thursday's equities action, oil and gas stocks traded mostly higher, with the Oil Service Index
OSX, +0.91%
gaining the most ground. See Energy Stocks.

In other commodities trading, gold futures closed modestly lower after a failed attempt to reach $675 an ounce. See Metals Stocks.

Taking a broad measure of the commodities markets, the Dow Jones AIG Commodity Index
26099104
was up 0.8% at 163.26 points.

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